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‘Is the marketing function in your organisation a cost centre or a profit centre?’ This is a question I’ve asked many times, both as a consultant and an investor. It is shorthand for ‘do you understand the role of your marketing function in driving growth?’ and ‘how mature is your marketing function?’ Often, the answer to this question will be ‘a cost centre’. This is normally the case for SMEs and especially those selling to other businesses (B2B). I’m going to explain why you should aspire to have a marketing ‘profit centre’, how to assess your starting point and how to get there. Why should your marketing function be a profit centre? From the CEO’s perspective, a marketing function that operates as a profit centre offers some level of predictability of outputs rather than just outputs; for example, ‘delivering 1,000 customers at a £50 Cost Per Acquisition (CPA)’ vs. ‘spending a £50,000 marketing budget’. There should be an established understanding of cause and effect, some level of marketing attribution. A CEO will value having another controllable growth lever at their disposal. Being a profit centre means that the marketing function and Chief Marketing Officer (CMO) has both ownership and accountability for driving commercial outcomes. From the CEO’s perspective, this should lead to alignment between the marketing function and the overall business strategy, and between marketing spend and the overall financial objectives of the business. Together this should translate a higher chance of hitting collective goals than the alternative. From the CMO’s perspective, having clear ownership of commercial outputs, as opposed to just inputs, elevates their role significantly. In fact, this can be one of the main differences between organisations where the most senior marketer is part of the C-Suite team rather than one or two levels below, and responsible for spending a budget but not for quantified and specific commercial outputs. Being a profit centre also suggests that the organisation has collectively understood the value that a high performing and output-oriented marketing function can play in driving business growth, which should create more opportunities for career development for those in the marketing function and the CMO personally – for example being given responsibility for entering new international markets or taking ownership of broader strategic topics such as pricing or aspects of product and the overall customer journey. Finally, directly embedding a profit-based marketing output metric such as Return on Investment (ROI), perhaps based on Customer Lifetime Value (CLV/LTV), to gauge marketing effectiveness can be very helpful for a CMO. It provides a framework for deciding what to spend and how to spend it, as well as making conversations with the finance team more strategic and growth focused. How can you tell where you are starting from? The easiest way to work out whether your marketing function is operating as a cost centre or profit centre is to consider the recent conversations you’ve had about marketing spend. If the focus has been mostly on the amount you are spending, you are probably working with a cost centre. If the focus has been on the quantified results and ROI that than marketing function is generating, you are probably working with a profit centre. As a CMO, you could also try a simple exercise. If you went down the list of everything you spend on marketing, could you justify it based on a commercial return? Not just the presence of a particular channel but the specific amount being spent? Often when I’ve asked this, the main input to this year’s marketing budget is whatever last year’s budget was. You could also look at the KPIs used for the marketing function and the extent to which these are inputs vs outputs. Perhaps ask yourself my favourite question, "where would you spend your next £1"? How can you transition from marketing as a cost centre to a profit centre? There are five components which can help you move towards marketing as a profit centre over time: Start measuring marketing effectiveness - ROI (perhaps on LTV basis) or even CPA based on some level of marketing attribution; Use this understanding to start communicating internally who your most valuable customers are, and which marketing activities you would start/stop/continue with the aim of getting more of them; In your next planning cycle, armed with your new measurement of marketing effectiveness, adopt a zero-based approach to planning your marketing spend. In other words, forget what you’ve spent in the past and plan from scratch with the objective of generating as many profitable customers as possible. Make sure to talk to your finance team about this first though, as they will need to support your approach; In your internal conversations around this new approach to marketing planning, as well as more regular discussions of business performance, reframe conversations around ‘budget’ from talking about spend inputs to talking about commercial outputs; and Hire for people in your marketing function and as CMO who talk about quantified commercial outputs in their CVs vs awards and amount of budget previously managed. Some conclusions Working out whether a marketing function was operating as a cost centre vs. a profit centre is an important question or me when I’m reviewing potential investments. I’m looking for a demonstrable a growth lever that a Management team understand and can control, that will help to underpin my investment case. Of course, there are some situations when a marketing function may have something have a hybrid model. For example, I’ve worked with a restaurant operator where the marketing function operated as a ‘cost centre’ when it came to brand-level activity required to support each restaurant (e.g., creative content and point-of-sale material), but as a profit centre when operating the group’s well established and well-adopted customer loyalty programme. Even if you aren’t sure where your organisation sits today, I think that asking the question I started this post with will invariably lead to an interesting conversation about the role of marketing in your organisation, and hopefully some tangible outcomes. If you’d like to discuss the strategic role of the marketing function in your business, please Contact Me. All views expressed in this post are the author's own and should not be relied upon for any reason. Clearly.

Working as both a marketing leader and an investor, a constant challenge has been to prioritise among the myriad ways that I could spend my time. As Elton so wisely sang in Disney’s Lion King; there’s ‘more to do than can ever be done’. Among the many tools I've used to help me prioritise tasks, one that has proven to be invaluable is the Eisenhower Matrix, also known as the Urgent-Important matrix. This decision-making tool traces its origins to Dwight D. Eisenhower, the 34th U.S. President, who was revered for his exceptional organisational skills. Quoting an unknown academic, he said once "I have two kinds of problems, the urgent and the important. The urgent are not important, and the important are never urgent." This principle was further refined by Stephen Covey in his book ‘The 7 Habits Of Highly Effective People’ into the matrix we know today. I think this has specific utility for marketing leaders such as Chief Marketing Officers (CMOs) given the variety of different activities they can be pulled into during daily business. The Eisenhower Matrix can break down your to-do list into four quadrants: 1. Urgent and Important 2. Urgent but not Important 3. Not Urgent and Not Important 4. Important but not Urgent We’ll dive a bit deeper into each quadrant and I'll share some practical examples from my own experience as a marketing leader. Quadrant 1: Urgent and Important In this quadrant, we encounter tasks that require immediate attention and contribute significantly to our marketing goals. They often arise unexpectedly, leaving us little time to prepare. One instance from my own experience was when we had to manage a PR crisis that threatened to tarnish our brand's reputation significantly. It was all hands on deck, with our team working around the clock to navigate the crisis and mitigate potential damage. Similarly, launching a time-sensitive email campaign for a promotional event is another example of a task that falls into this quadrant. I remember when we would run our January sale at CarTrawler, this would become all-consuming for a week or so beforehand as we worked to make sure we had great content visible across the site. Quadrant 2: Urgent but not Important This quadrant is filled with tasks that demand immediate attention but don't substantially contribute to our overall marketing objectives. These are often routine tasks that, while necessary, can be time-consuming and divert attention from strategic goals. For instance, managing a barrage of non-critical emails that keep pinging throughout the day, or handling ad-hoc requests from other departments that could be addressed by someone else. One of my regular battles is with my overflowing inbox. While it's essential to stay connected, spending excessive time on non-essential correspondence can derail my focus from more important tasks. I try to manage this by dealing with emails at set times in the day, as well as delegating specific responsibilities where appropriate (such as representing the marketing team at cross-departmental meetings). Quadrant 3: Not Urgent and Not Important This quadrant comprises activities that neither require immediate attention nor contribute significantly to your marketing goals. These are tasks that tend to serve as distractions rather than value-adds. For instance, compiling reviews of competitor content without a specific question you are trying to answer, attending partner events with little return on investment, or getting stuck in unproductive internal meetings. It's a quadrant filled with tasks that create an illusion of busyness without contributing much to our goals. And finally, the quadrant that holds the most significance for me: Quadrant 4: Important but not Urgent These are tasks that, while not requiring immediate action, are critical for long-term success. It's often a strategic domain where the foundation for the future is laid. Consider planning and implementing your organic search/SEO strategy, for instance. This involves conducting market research, identifying emerging search trends and your Search Headroom, technical analysis of your site, and mapping out execution timelines. It's a process that doesn't scream for immediate attention on any given day but holds the key to future growth for many businesses. Significant analytical projects can also end up in the this quadrant - for example, measuring and increasing customer lifetime value isn't going to boost today's or this month's numbers; but almost certainly can influence performance over a multi-year time horizon. Innovation also often sits in this quadrant – running a test in a new channel, conducting an overhaul of your ad copy or creatives, developing new customer journeys. These tasks are easy to put off for a day but leave them for a year and you will start to lag your competitors and the needs of your target customers. Another task I've often placed here is nurturing relationships with key stakeholders. This includes clients, partners, and even team members. It involves regular check-ins, feedback sessions, and brainstorming collaborations—activities that contribute immensely to the team's growth and the brand's reputation in the long run. Understanding and cultivating the "Important but not Urgent" quadrant is a pivotal part of my role as a CMO. It's here that we prepare for the future, innovate, and build the backbone of your business’s longevity. This quadrant isn't about putting out fires; it's about fire prevention. Implementing the Eisenhower Matrix in the cadence of your marketing function offers more than just a structured to-do list; it provides a strategic roadmap that aligns your tasks with your long-term objectives. It serves as a reminder that effective leadership isn't born from merely reacting to problems but from proactive planning and focus on long-term goals. So next time you're overwhelmed with a list of tasks, pause, and categorise them in the Eisenhower Matrix. Remember, the 'Important but not Urgent' quadrant might seem quiet, but it's often where the seeds of your future success are sown.

LTV, or customer lifetime value, is one of the most important metrics for your business to understand. It equates to your ability to turn your proposition and customer relationships into monetary value over time. When combined with your Cost Per Acquisition (CPA), the LTV:CPA ratio demonstrates the fundamental unit economics of your business, and how efficiently you can grow. To help bring the theory of LTV and the LTV:CPA ratio to life, I wanted to take three real-world examples and offer some thoughts that may help you to interpret the data that is being presented. There is no standard methodology used, so knowing how to critique an individual example is important before you draw conclusions and/or make comparisons. This is something I've done many times when reviewing Information Memorandums and Management Presentations as an investor. I need to stress that the examples I’m going to share are only for information and education rather than for any kind of financial advice. I think it is also important to note that very few public companies disclose this type of information, and I think that all three examples should be praised for the fact that they do. They just happen to be good examples that help us to think about the questions we might ask the Management team if we want to better understand a specific LTV or LTV to CPA ratio analysis. Example 1 – Wix Wix, the website builder & CMS provider, presents a version of the LTV to CPA ratio called ‘Time to Return On (Marketing) Investment’. This looks at the cumulative ‘cohort bookings’ compared to marketing costs, citing a ratio of 4.8x after 19 quarters (4.25 years) based on the Q1 2018 cohort. On the face of it, this chart shows a positive trend – but that isn’t particularly meaningful, as it just relates to the allowing more time for a cohort to generate revenue before comparing against the customer acquisition costs. I would be asking to see a comparison between different cohorts over the same time period, e.g. the Q1 2022 cohort compared to the Q1 2021 cohort and the Q1 2020 cohort for the equivalent first three quarters of their relationship with Wix. This will tell us whether ROI is increasing, decreasing or is stable. Reading the small print, my interpretation is that the ‘cohort bookings’ is a revenue figure rather than a profit figure – I’m sure Wix has healthy software margins but I would want to look at a profit level ROI, having deducted direct costs as well as variable personnel costs such as their customer success team. The marketing costs are described as ‘direct acquisition marketing costs’. I would be asking whether this includes things like martech, agency and employee costs, as well as media costs that are most readily allocated to customer acquisition activities (vs. customer retention or partner marketing). Getting a true picture of Cost Per Acquisition (CPA) is in my experience the most overlooked aspect of analysing the LTV to CPA ratio. Example 2 – Vimeo Vimeo, the video hosting provider, goes a step further than Wix in showing the progression of its LTV to CPA (LTV/CAC) ratio over time, split between its two main customer segments. It uses this analysis to support the fact that it has ‘efficient [customer] acquisition’, which the ratios certainly support. Digging into the definition provided, a positive is that Vimeo is taking a gross margin level view of customer lifetime value – but I would be asking the Management team how they extrapolated value over the customer lifetime. I would guess that they’ve used a current measure of net revenue retention. I always treat this with caution as it implicitly assumes that the current rate of retention can be sustained indefinitely, which understates the risk of innovation and competitive disruption over the longer term. I prefer using a fixed time ‘window’ of time, for example five years. Looking at the timing of the big step-up in ROI through Covid for self-serve customers, it is possible that this was driven by a big positive change in net revenue retention which may or may not be sustained. As with the Wix example, I’d also be asking about the impact of variable personnel costs such as their customer success team, if these aren’t already factored into the gross margin. The customer acquisition costs here seem to encompass all sales and marketing costs, I would check that these include personnel costs and also ask whether we should be taking any costs out that are more related to servicing existing customers or partners – i.e. are we overstating Cost Per Acquisition? Example 3 - Remitly Remitly doesn’t show a trend over time for their LTV to CPA ratio, but they do use a fixed five-year window, which is the most common comparison period in my experience. Reading the small print, they say that they project future periods ‘based on robust statistical models that source thousands of existing customer observations’. This is a perfectly reasonable thing to do, but I would be asking how this might compare to the actual observed historical data as you may find that there has been a notable change in their proposition or customer behaviour which has led Remitly to adopt this projected approach to lifetime value. As with the above examples, I would also be digging into the definition of CPA here, which Remitly defines as ‘direct marketing expenses deployed to acquire new customers’. The same question applies around the inclusion of martech, agency and employee costs. One thing that I would also be curious to learn more about is the statement that there are ‘corridor-specific targets based on customer lifetime value’. This might shed some light on which corridors have the most potential for efficient growth, which would clearly be interesting to know. In conclusion – there are some common threads here. Make sure to read the small print to understand (i) the time period over which the LTV to CPA ratio is being calculated, (ii) whether lifetime value is based on profit (good) or revenue (bad), (iii) and how customer acquisition costs are being calculated. As I said above – these three examples are in the minority of public companies in sharing these metrics in the first place, and all look healthy. You are now hopefully armed with some questions that can be applied to any LTV to CPA ratio you see before you draw conclusions or make comparisons. If you’d like to discuss how you can better understand and use Customer Lifetime Value in your business, please Contact Me. All views expressed in this post are the author's own and should not be relied upon for any reason. Clearly.

How many times have you seen a set of customer ‘pen portraits’? The format is ubiquitous, normally a series of densely written pages of text accompanied with a stock image of someone smiling into the camera and a generic name, where we are told many specific, qualitative traits that our young professional or retired couple customer possesses – where they shop, their attitudes to politics, whether they have sugar in their coffee. The problem with this approach to customer segmentation in my experience is that it leaves me asking ‘so what?’. A robust customer segmentation needs to have three things: A ready comparison to available market demand – how much of the market does each segment account for in terms of volume/value size and growth; A ready comparison to our existing customer base, allowing us to define our market share of each segment in combination with (1) and define the segments that are worth the most to our business today & in the future (for example based on customer lifetime value; and ‘Prospectable’ characteristics that will allow marketers to take immediate actions to acquire customers from the most desirable segments. Pen portraits come from an analogue age when things like knowing which newspaper a prospective group of customers read was the most specific information a marketer could hope to know when deciding where to prospect for new customers. In today’s marketing world, a pen portrait can be helpful when thinking about the tone of voice of content or creative concepts, but it doesn’t really help inform where we should go looking for new customers. How to create a customer segmentation To create an actionable customer segmentation, you should focus on the ‘prospectable’ characteristics of your target customers. By this I mean the attributes or behaviours that are externally visible and therefore possible for you to target with your marketing activity. For example, in the B2B world this could include attributes such as company size, growth rate, vertical, or geographic location, and behaviours such as the recent appointment of a new CEO or an M&A transaction. In the B2C world this could include attributes such as where someone lives, or in some ages their age or gender, and behaviours such as the day/time they are searching for your product/service. We can’t really consider an attribute or behaviour as ‘prospectable’ unless it is something that we can target within our main marketing channels – can we bid more within performance marketing, or exclude prospects that don’t have these traits altogether? It is almost impossible to target based on traits such as attitudes – which often form a core part of pen portraits. If you’ve previously analysed customer lifetime value, this is normally a good place to start when building a segmentation, as it will tell you the traits that make the biggest difference to the value of a customer to your business. We want our segments to be unique and well differentiated from each other. The result of following this principle to building a customer segmentation is normally a much tighter definition of each customer segment perhaps with only 2 or 3 criteria used to define between 4 to 8 different segments. Because we are only using ‘prospectable’ traits, it is also normally a lot easier to map both the market and our existing customer base onto these segments, allowing us to map the areas of concentration and opportunity for our business. You can then use these segments in conjunction with primary research to understand things like awareness and consideration for your business by each segment. Figure 1 - example output from a customer segmentation exercise You can use various statistical techniques such as cluster analysis or more advanced machine learning-based models to use patterns in your own data to build segments, but as a starting point I always advocate starting with a segmentation that you define from first principles and then refine with more advanced analytics. Keeping it simple rarely leads you down the wrong path. This approach elevates a customer segmentation from a ‘marketing’ tool to a ‘strategic’ tool that can drive business planning and how you report performance. You might base your annual marketing plan on growing your share in a particularly attractive segment or decide to move away from a historically high-volume segment because you’ve realised it has lower overall customer lifetime value. Pen portraits can play a role when designing creative content but shouldn’t be the starting point for an actionable customer segmentation. If you’d like to discuss how you can create an actionable customer segmentation in your business, please Contact Me. All views expressed in this post are the author's own and should not be relied upon for any reason. Clearly.

Of course, this could be £100, £10,000 or £1 million depending on the size of your marketing budget today - but this one question has proven to be the most illuminating thing that you can ask a marketing leader (your Chief Marketing Officer, Marketing Director, Head of Marketing or equivalent). This is also an excellent question for marketing leaders to ask themselves. It helps you/them to understand both the strategy they’re pursuing and their understanding of what is working /not working amongst their marketing activities today. The most important thing to say about this question is that there is no single right answer. The silver bullet is not TikTok ads, billboards on the tube, attending more trade shows or a shiny new marketing automation platform. In fact, it’s not really about the ‘what’ of the answer at all, but the ‘how’- the thought process that has been used to answer your question. Ideally, a thought process that has happened long before you’ve asked the question. Think back to your exams at school – we are more interested in seeing the workings than the final answer. The first distinction to draw between the types of answers you may hear is whether your marketing function is run as a cost centre or profit centre. If your marketing function is run as a profit centre, you may hear answers along the lines of: ‘if you were prepared to accept a slightly lower return on investment (ROI) then I could increase our spend in channels A and B and make slightly more profit overall’ or ‘I could test these new channels where I’m not sure about the ROI but I have a hypothesis that I’d like to test’. On the other hand, if your marketing function is run as a cost centre, you’ll typically hear a more qualitative answer with a list of activities that could be run without an estimate of the return on any potential investment that you might expect to receive or hires where the expected impact is vague. This ‘spray and pray’ approach to marketing is something I see frequently and I’m going to talk about separately in another post. Some of the best answers I’ve had to this question have said “I wouldn’t spend any more money because I’m happy that within my target returns envelope, I’m spending the most I could in the right areas”. Another important distinction in answers to this question is whether marketing leader focuses purely on brand-new customer acquisition versus the other ways in which your marketing function can support the growth of your business and the maximisation of customer lifetime value. Examples of this might be choosing to invest in a customer loyalty programme or other aspects of the customer experience that could drive repeat business/retention and customer advocacy. Marketing leaders who are thinking holistically may even talk about how extra spend should be placed somewhere else in the organisation to benefit the outcomes of marketing activity for example, to improve sales operations, customer success or accelerate conversion rate optimisation efforts. These types of activities too often fall into the important, but not urgent category, but the best marketing leaders will understand that modest investments in customer experience can yield fantastic returns, albeit over a slightly longer time then short-term investments in performance marketing or the like. This also shows that they are not motivated by having the biggest marketing budget but rather on achieving the best outcomes for customers and the business. A third category of potential answers I’ve heard relates to resolving a specific pain point that the marketing leader is experiencing. For example, one business I’ve worked with recently has experienced multiple tracking issues because of consolidating several different websites, and in that case, allocating additional marketing spend towards hiring specialist analytics and tracking resources on a short basis would be well justified. I would follow up by asking about long-term additional spending choices in addition to the understandable short-term issues. Equally, it might be that your business is going through a particular period of short-term focus e.g., last quarter of the financial year – and your marketing leader may raise a long-term initiative e.g., project work to understand customers and their needs (e.g., a customer segmentation). Or they may talk about hiring additional analytical resource, demonstrating a desire to become more evidence based in decision-making which I take as a real positive. In most cases, I would expect a marketing leader who seems to have a lot of conviction about a particular set of channels or activities for additional investment to be basing their thinking on a robust market and customer segmentation. The inverse of this question can also be extremely insightful: “if you had £1/ £100/ £1m less marketing budget, what would you change and why?” A great answer to this question will talk about activities which are currently delivering close to the minimum ROI the marketing leader is prepared to accept, for example reducing your bids in paid search (PPC) or reducing spend in a particular customer segment, product category or geographic area where returns are less attractive. One often overlooked area of marketing budgets is the amount of money spent on marketing technology and data providers. Contracts were often signed several years previously with supplier friendly annual inflation clauses (which I will of course be advocating for in an upcoming piece on pricing…), and many tools are used rarely if at all. In my experience, a simple review of the martech/adtech tools that a business is using can yield some cost savings. A less ideal answer to this question is to simply reduce everything by a small amount or to reduce investment in aspects of the customer experience without considering the consequences. Again, we’re just trying to understand that your marketing leader is thinking about what is working and not working, to make investment decisions as objectively as possible. In summary, when I ask these questions, I’m much more focused on how they are answered than the specific activities that are described by marketing leader. I’m looking to understand: Whether the marketing leader is thinking critically every day about where they spend their time, their resources and their budget; That they are motivated by commercial outcomes for the business and using ROI measurement as a key tool to achieve this - demonstrating that they operate marketing as a profit centre, rather than as a cost centre; Whether they have a sufficient balance of tried and tested core activities, but are also open-minded about testing new activities; That when they test new activities, they do so in a robust way that will provide a definitive answer as to whether something works or not (I’d rather test one channel extensively for three months and find out for sure if it works rather than three channels in a more superficial way); and Whether they are thinking holistically about how marketing can maximise customer lifetime value across both the areas marketing directly touches and elsewhere in the business rather than just focused on attention grabbing campaigns or shiny new marketing tools. This exercise isn’t designed to catch someone out, so allowing your marketing leader time to prepare an answer to this question will lead to a better conversation (you could even direct them to this post!). When I meet a management team for the first time, I will include a question like this on an agenda that I will share well in advance. I’ve also used this when interviewing candidates for marketing leader roles, with reference to their current or previous roles, and it has often been the most insightful part of the conversation. If you’d like to discuss how you can help your marketing leader answer these questions for your business, please Contact Me. All views expressed in this post are the author's own and should not be relied upon for any reason. Clearly.

I’ve recently revisited Sam Savage’s "The Flaw of Averages: Why We Underestimate Risk in the Face of Uncertainty", a book he published in 2009 building on his original article from 2000. Savage’s concept is that decisions made based on average assumptions are often flawed due to overlooking the variability in data. Savage illustrates how this statistical pitfall can lead to disastrous outcomes across various fields, from finance and business to healthcare and climate change, urging a more nuanced approach to understanding and managing risk. In one example, Savage describes the path of a drunk walking down the middle of a road. If the drunk's position at any point is an average, it might suggest he is safe in the middle of the road. However, considering the variability and uncertainty of his movements, it's clear that he's in danger of veering into traffic, which the average position fails to predict. This metaphor illustrates the flaw of averages by showing how focusing on an average (the drunk's position in the middle of the road) can dangerously overlook the variability and uncertainty in data (the drunk's unpredictable movements). Figure 1 – Jeff Danziger’s original cartoon from the 2000 article © Jeff Danziger Just as the drunk's average position misleads us about his safety, so too can average marketing ROI mislead us about our marketing effectiveness. Measuring marketing ROI and the flaw of averages If your business has achieved even modest scale, the chances are that your marketing activity covers several channels, multiple customer segments, multiple product/service offerings and potentially multiple geographies. You might also be spending time and resources targeting existing or returning customers as well as brand new customers. However, even with this level of complexity, you will still probably focus on an overall measure of marketing effectiveness, whether that is marketing costs as a % of revenue, cost per acquisition (CPA) or return on investment (ROI). The flaw of averages tells us that focusing on an aggregate, average measure may lead to overlooking the range and diversity of outcomes from marketing efforts, and potentially missing opportunities for increased efficiency and growth. For example: Misinterpretation of Campaign Performance: A marketing campaign could include several different components, each with different ROI – for example different channels. By looking at the average ROI, marketers might miss understanding which components are working well and which ones aren't. This could lead to misallocation of resources. Ignoring Variability: The ROI from marketing efforts could be highly variable. Some campaigns might result in very high ROI, while others might yield low or negative returns – or perhaps the variability occurs over time. An average figure could hide this variability, potentially causing surprises in future campaigns. An ROI of 2.5 with low variability should be viewed very differently to one with high variability. Masking Outliers: There might be certain marketing efforts that result in exceptionally high or low returns. These outliers could significantly impact the average ROI, but they might not represent the typical outcome of a marketing effort. Discrepancies in Target Audience: Different segments of the target market – customer segments or geographies - may respond differently to the same marketing effort. Using averages may hide these discrepancies and could lead to an inefficient allocation of resources. The message from these examples is clear – make sure to segment your analysis of marketing performance across a range of dimensions to understand performance, rather than relying on average measures. If you are a business leader or investor – dig into average measures and ask to understand the level of variability in the underlying data. Setting average targets for marketing ROI One area where I think the flaw of averages can be particularly troublesome for marketers is when setting targets for marketing ROI. I’m thinking specifically about businesses that spend a significant amount of their budgets on performance digital marketing such as paid search/PPC. Having done an analysis of customer lifetime value (LTV), marketing leaders will often use the LTV:CPA ratio to select an ROI target that will deliver an acceptable balance of growth in customer numbers and profitability. However, the challenge of using an average ROI target on a day-to-day basis is that significant parts of your marketing budget are likely to be loss-making or marginally profitable. The approach I’d advocate instead is to adopt a minimum ROI on a day-to-day basis. This is much more practical to implement than trying to manage a large portfolio of activity towards an average number. Perhaps you set a minimum ROI 25%-50% lower than the average ROI you are trying to achieve and monitor both closely. I’ve found that adopting this approach reduces variability in performance and focuses front-line marketers on profit & commercial outcomes. So, the next time you are preparing or reading headline, average measurements of marketing effectiveness, remember the flaw of averages and think about what interesting opportunities and learnings might be hiding within. Be sure to dig into performance at granular campaign level, customer segment, product line, new vs existing customer and over time – all should generate valuable, actionable learnings. If you’d like to discuss how you can better understand marketing ROI in your business, please Contact Me. All views expressed in this post are the author's own and should not be relied upon for any reason. Clearly.

An Ideal Customer Profile (ICP) is a description of the customers that you would most like to acquire for your business. In other words. If one more customer walked in the front door, brackets metaphorically). What do you want them to look like? The ICP is a more specific version of the long-used “target market” concept in marketing. The ICP, however, goes beyond demographic/firmographic information and can include customer problems, the triggers that have caused the customers to start considering a purchase, organizational structure, decision-making processes, and more. This level of specificity has become increasingly common for two reasons in my view: (i) digital marketing offering more precise targeting and segmentation options; and (ii) Customer Relationship Management (CRM) software, like Salesforce, allowing companies to gather more nuanced customer data, making it possible to build out detailed profiles. Both marketing and sales teams can use an ICP when setting up marketing activities and selecting target audiences, creating messaging and designing the customer journey. They can also help product and operations team to maximise the relevancy of your proposition and customer experience to your target customers. Your ICP should embody your collective understanding of your target customers and maximise your organisational alignment around meeting their specific needs. As organisations grow, many will develop multiple ICPs, perhaps for different product/service offerings or just for different use cases – but without an understanding of your ICP you risk low conversion, dissatisfied customers and poor retention. To read more about the problems of not having a specific enough ICP, I’d recommend reading this classic HBS case study. How to define an Ideal Customer Profile? There are three inputs to consider when defining an Ideal Customer Profile for your business. Think of these inputs as overlapping circles in a Venn Diagram: They are: “Likeability” – which customers are going to be worth the most to your business over time, because they spend the most and/or stay the longest? This is equivalent to their Customer Lifetime Value, which I’ve talked about previously. You need to dig into your headline analysis of customer lifetime value to understand which profiles lead to the highest LTV, to avoid falling into the Flaw of Averages. “Available targets” – this is the number of potential customers of any type that are available for your to target, which should be an output of a market & customer segmentation exercise. If possible, I like to think about this as the number of prospective customers who are likely to be ‘in-market’ at any given time, say within a year. For example, if the typical model for your product/service is a three year contract, than at most 1/3 of your prospective customers will be in-market in a single year. You also need to adjust for customers you have already won in any given segment. “Likelihood” – which prospective customers are most likely to convert, based on how well your product/service meets their needs, or in other words – solves their problem(s). Your ICP(s) should by identified by combining these three elements – think about it like an (illustrative) formula that you can use to estimate the potential value of an ICP: If you are starting out an exercise of thinking about defining your ICP, one approach is to create three options, each one maximising these three variables – the profile with the best LTV, the profile with the highest number of available customers, and the profile with the best conversion rate. Then think about the commonalities and differences between these profiles. This process is very iterative in my experience - sometimes you need to ‘pilot’ an ICP and go through a few rounds of ‘test and learn’. Signs that you’ve got the right ICP include improved new business performance, shortened sales cycles and improvements in customer satisfaction. One watch-out is that your ICP needs to be specific enough that it will exclude a reasonable proportion of the wider market. Without this level of specificity, your organisation won’t be able to make the trade-offs needed to truly meet the needs of the customers you are targeting. For example, if you are selling B2B, an ICP that describes a target company size of ‘50+ employees’ without an upper limit, is probably not specific enough. I’ve seen that reticence to be too specific can make the whole exercise a bit pointless. I’ve talked previously about both understanding customer lifetime value (LTV) and how you can create a market & customer segmentation to understand the number of potential customers that match a potential ICP – so let’s dig in a bit more on ‘likelihood’. The importance in understanding customer problems Let me share a personal example to illustrate the importance of understanding customer problems. I hit a very significant personal milestone recently, one that I’ve been working towards for nearly a year – Gold status with the Pizza Express loyalty programme. A culmination of many weekend trips with the children for pizza and pasta all over the UK. For me to be such a loyal customer, Pizza Express is clearly solving some problems for me. However, it isn’t the quality of the food alone that has driven my loyalty – sure the food is good, but living in London there are certainly some better options for Italian food close by. So what have they got right? For me, there are three problems they solve better than any other option: Speed – my children are impatient in the extreme (I don’t know where they get that from…). Pizza Express averages food and drinks for the kids on the table within ten minutes of being seated, which saves a lot of stress. I’m also able to pay on the app so there is no hanging around for the bill at the end of a meal. Consistency – my son in particular is an anxious eater. Knowing his food is going to look and taste the same at any Pizza Express location means he is relaxed throughout the experience. Availability – there are so many Pizza Express sites, that almost wherever we go we can find one nearby. This means that often it will be the first thing I look for when thinking about where to go for a family weekend lunch – I know it makes my life easier! Now these problems may be entirely different to that of other prospective customers, making Pizza Express less of a likely choice for them. But the proposition of Pizza Express is so well suited to solving my problems as a customer, they’ve won my loyalty. To stop thinking about food briefly, understanding the different problems that your prospective customers face is an essential part of selecting your ICP. Working out the profiles of customers for whom your current proposition is a ‘perfect fit’ can lead to higher conversion, shorter sales cycles, lower Cost Per Acquisition, higher customer retention and more customer advocacy. You should think through each aspect of what you offer your customers and how you deliver value to them. In the case of Pizza Express, it isn’t really the food that has differentiated them for me, but the service and scale. The same can be true in many commoditised markets – you might in theory offer the same product as your competitors, but you can still create meaningful differentiation through your service – for example by using technology to make your organisation faster or easier to work with for customers, or giving the customer more flexibility, choice, and control. Just think about Amazon as an example of this. Understanding customer problems is best achieved through talking to your customers – usually a combination of both qualitative and quantitative research. I always find it insightful to ask what is happening before a customer decided to start searching for businesses like yours e.g. a major life or business event. It is also important to understand what has made stay a customers. You can look at other internal data for example which profiles of customers convert the highest today, or move through your pipeline with the best velocity. I’ve created a checklist for customer research and to help you avoid the common mistakes I’ve seen people make when collecting and analysing customer research data. In summary Your Ideal Customer Profile is something that should run through the core of your organisation, shaping the choices you make at every single customer touchpoint. It is data-led, based on understanding your market & customer segmentation, drivers of customer lifetime value, and the customer problems you are setting out to solve. It is specific and prospectable – not just a pen portrait. You might have to iterate a few times to get it right. Leverage the power of an Ideal Customer Profile to align your organization, streamline your customer journey, and drive sustainable growth. If you’d like to discuss how you can create and use Ideal Customer Profiles in you business, please Contact Me. All views expressed in this post are the author's own and should not be relied upon for any reason. Clearly.

I’ve run more than fifty primary customer research exercises and have probably made every mistake there is to make. This is one of those tasks that seems simple on the surface but the devil is in the detail. I want to share my checklist that any marketer or strategy consultant should use when preparing to run customer research, focusing on online, quantitative surveys. This guide is intended for customer research to inform internal choices about strategy and tactics. If you are creating a survey to generate website content or PR coverage then some of the steps below may not apply – but I think most are helpful nonetheless. If you have any to add – please let me know, I’m sure that the list can always be improved. How to run great customer research Planning your survey Be clear on the hypotheses you’re looking to test and ties to specific questions to ensure you’ll get the answers you need. Helps to avoid surveys which are too long with sprawling logic Start with some small-scale qualitative research: a combination of one-to-one discussions and focus groups to inform questions and response options for your larger sample (expensive) quantitative research. I can highly recommend Kathryn Coles at White Rabbit Research for any focus groups you are looking to run. Don’t outsource the design of your survey script to an agency or someone who has never written customer research – crafting a survey script is a skilled job, and it is much harder to edit a lengthy script that you aren’t happy with. As a minimum, write the questions and a starting list of response options yourself. Targeting your survey When researching to understand customer acquisition behaviour, I normally exclude those customers whose last purchase is not within recent memory. Humans unfortunately have short memory spans for the finer details that you will be interested in capturing. The definition of ‘recent’ will broadly correlate with the significance of the purchase: e.g. the last week for purchasing a cup of coffee, but the last three years for selecting an ERP system. Target your survey at both customers and non-customers – this will provide invaluable context to the perspectives of your own customers. You’ll typically need to use a panel provider to reach non-customers. Decide the target sample size based on the statistical significance you aim to achieve and the number of ‘cross-tabs’ you want to analyse your data by. The rule of thumb is that for most businesses, where there is a large group of potential respondents (say more than 50,000), that you need a sample size of 380+ for a 95% confidence interval with a 5% margin of error – you can use one of many online calculators to help with this. If you want to introduce cross tabs then each subset of sample within the cross tab needs this sample size e.g. regional data, gender, age etc. That’s why most consumer surveys start at a sample size 2,000 eg to allow segmentation into five age groups when reviewing responses. If you are running a survey with senior B2B decision makers, I would be cynical about using large B2C-focused panel providers. Whilst they might ask their members about their job titles, they will do very little validation. I’ve seen panels with a surprisingly high proportion of Chief Executives! Instead you can use one of the expert network providers such as Third Bridge or GLG. You will pay a premium per respondent but I’ve found the quality to be much better. Designing your survey questions You will typically need a handful of screening questions at the start of any survey, to ensure that you are reaching your intended respondents. These are also an incredibly valuable way of understanding ‘incidence’ among the population. Make sure your panel provider sends out the survey to a representative sample, then when you ask a question like ‘do you own’ or ‘do you use’, the responses will give you a measure of incidence. As a bonus, many panel providers will not charge you for these initial screener questions. For many products or services, both B2B and B2C, include a screener question to confirm that the respondent was the decision maker in their business or household for the most recent purchase that you intend to ask about. Focus on actual, recent behaviour as opposed to expected behaviour/intentions – my own experience and lots of well documented research says that our ability to predict our own behaviours as humans is pretty limited and we end up giving the answers we think are expected. Ask open questions – in other words don’t lead the witness. This is a common issue I’ve seen with draft scripts. Avoid framing or anchoring in your question if you want valid answers. A fairly standard question that I include is around provider awareness and usage – a list of providers, with options for: ‘I’ve never heard of this provider’; ‘I’m aware of this provider but haven’t used them’; ‘I’ve used this provider in the past but not currently’; and ‘I’m a current customer of this provider’. Many survey scripts I see include questions about provider selection criteria – ‘why did you choose brand ABC’. These can be helpful, but I prefer to focus first on purchase triggers - ‘why did you decide to consider purchasing [product/service]’ - and initial research behaviour – ‘what did you do first to find potential providers of [product/service]’. As a marketer, I find these responses more actionable than selection criteria, which tend to be more about the product/service itself than the customer’s purchase journey. Linked to this, you can ask separate questions about why a customer has continued to purchase a product/service from the same provider. The reasons may well be different to those when they first purchased – including asking how hard the customer believes it would be to switch provider. I always include a Net Promoter Score question – for providers that the respondent has recent, direct experience of using. Make sure to follow this up to understand the reasons for high and low scores, and potentially also a free text field for ‘what would provider ABC have to change to achieve 10/10’. Use language your respondents will understand (and test this out) – avoid business jargon (even in B2B surveys) and include definitions for any terms there may be some ambiguity around. Designing your response options Ensure you provide a ‘mutually exclusive, collectively exhaustive’ (MECE) set of response options for respondents, in particular where you will ask them to choose just one response. This is where qualitative research can be a great front-runner to a survey to help inform your response options. Overlapping response options will cause confusion and result in poor responses. Include ‘I don’t know’ / ‘I don’t remember’ as options. You might get slightly fewer usable responses as a result, but you will get better quality responses by excluding guesses; and it is also an interesting datapoint to see whether respondents actually recall the detail you are asking about. When seeking sentiment-type responses (e.g. ‘agree’ vs ‘disagree’), use an even number of response options. When you have an odd number of response options, respondents tend to gravitate towards the middle, ‘neutral’ option as it is cognitively easier for them – remember than even in well-rewarded surveys, most users are trying to complete their responses as quickly as possible. Running your survey You will normally start by ‘soft launching’ your survey to a small set of respondents. Make sure to review the responses carefully, in particular any free text fields, to spot confusing questions, missing response options, and broken survey logic. When asking your question around provider awareness, include some spoof provider names (i.e. make them up) – this is a good way to subsequently exclude respondents who are speeding through the survey. Just do a quick online search to make sure you’ve not accidently come up with a real business name! Ensure you understand the true incentives for panel respondents and that these match with the length and complexity of the survey. If you underpay you risk getting poorer quality responses. A panel provider should be willing to provide this information, and you should be wary if they are not. Include a free text field at the end of your survey asking for any further comments or feedback. This is a useful way to find errors in the survey when you are soft launching. Customer research is an essential input to defining your customer acquisition strategy, and this checklist will help to ensure a smooth process and high quality output. If I've missed any items from your own checklist, please let me know. The one topic I've not covered here is how to test attitudes toward price in a survey, as that is worthy of a post by itself – watch this space. If you’d like to discuss how to run primary customer research for your business, please Contact Me. All views expressed in this post are the author's own and should not be relied upon for any reason. Clearly.

Have you been frustrated by conversions about pricing you’ve had as part of a Management team, or as an investor? Throughout my time as both a strategy consultant and investor, pricing strategy has been a topic that has fascinated me. Whilst I’ve had many conversations with Management teams about pricing, I believe that price has been consistently underutilised as a value creation lever. I’m planning to write a series of pieces on this topic, so I thought I’d start by introducing how I think about pricing, and why it seems so hard to focus on pricing strategy in SME businesses - not least when I still see TV ads for mobile phone contracts and broadband providers hiding a CPI + 3.9% annual price increase in the small print! Why is pricing an attractive value creation lever? There are five key reasons why price should be something that every CEO and investor thinks about when putting together a value creation plan: It can really move the needle - pricing changes rarely require additional costs, so a 1% price increase will be much more meaningful to profits than a 1% increase in volumes, all things being equal. My broadband provider hasn’t given me faster speeds after my 14% price increase earlier this year! There are typically multiple ‘quick win’ opportunities in SME businesses, who have rarely spent much time thinking about price until they start to consider institutional investment. A pricing opportunity review can be very evidence based. You can triangulate between historical customer data, external benchmarks, and primary research. Recommendations can often be proven in a small-scale pilot before being rolled out. There are many common pricing levers between different types of businesses, and consultants who have seen many examples of these working in practice. Such empirical evidence & predictability means that future investors may be willing to ‘pay’ for the benefits of a new pricing strategy even before it is fully implemented. Pricing as a value creation lever blends pure strategy, tactics, and execution – essentially there are lots of different sub-levers available, meaning that you have a high probability of identifying meaningful opportunities in a pricing review (at least enough to justify the effort of the review itself), even if they don’t come from the area you were initially expecting. Pricing is especially important in periods of high-cost inflation/macro-economic headwinds, when other sources of growth will be harder to come by (and potentially when customers are already primed to anticipate some pricing changes). Isn’t this just about increasing prices? Pricing is about much more than headline prices. In fact, I think of it about being about customer value, in other words understanding how customers derive ‘utility’ – value - from your product/service and matching up your pricing model to this. The perfect pricing model is one where every customer is paying the maximum they are willing to pay but not a penny more (otherwise in the long run they will all churn). As the saying goes – “some of your customers would have paid more, the challenge is working out which ones”. This is why at the heart of any pricing review should be a meaningful piece of customer research – to understand how much each aspect of your product/service is valued by different types of customers. As you start to break down your product/service offering into its constituent parts, you can uncover things that you may not even perceive as explicit features of your offering today. For example, having a named account manager, or a fast response to customer enquiries. These previously unrecognised features may be really valued by some of your customers (who are willing to pay more for them) and not at all by others (who risk feeling like they are over-paying) This is why many pricing projects focus on ‘packaging’ – how to create bundles that combine different aspects of your offering that are differentially priced, and appeal to different customer segments. The classic example is the ‘good, better, best’ ranges on supermarket shelves. A lot of pricing value creation can also happen without changing prices or packages at all, but rather by focusing on how your chosen pricing strategy is communicated and executed during the sales process. Are your sales team price getting as opposed to price setting? Pricing reviews often cover areas such as the use of discounts, the incentives of the sales team, or even the utilisation of existing contractual terms such as annual pricing reviews or volume limits. Why is it hard to change pricing? Given the multiple ways in which pricing can be used to create value, why can it be hard to convince Management teams to commit time and money to a pricing review? I think that the main reason is that pricing can be an intimidating subject, for a few reasons: It is often new and unknown for SME management teams (the flipside of there likely being multiple ‘quick win’ opportunities) It can feel ‘anti-customer’, which is particularly difficult to reconcile for founders who are often incredible customer advocates. This is a good spirit to retain so that you avoid pricing changes that might yield benefit in the short term but in the long run could be damaging – where they create an incentive for someone to start a lower-priced competitor business, or risk negative coverage of your brand. It can be hard to identify a single owner for pricing – should it sit with the Chief Financial Officer? The Chief Revenue Officer? The Chief Marketing Officer? A Head of Pricing? Recommendations can be hard to implement, especially when they involve changing the incentives and behaviour of a large sales team. It can be analytically complex, with techniques such as ‘Van Westendorp analysis’ and ‘Conjoint’ only adding to the complexity – and in my experience pricing consultancies can sometimes over-emphasise their analysis over the conclusions. As a result – many other value creation projects are prioritised over pricing, and money is left on the table. The most effective approach I’ve found to get past these objections are to frame a pricing review as a customer value project. If we get it right, most SMEs should be able to both increase pricing and increase (or at least maintain) customer satisfaction, as they will be better aligning our product/service offering with the customer’s willingness to pay. How can you spot potential pricing opportunities? This topic merits its own discussion but I think there are two areas I would start with when trying to build a case for investing time & money in a thorough pricing review: Ask some simple questions: Who is responsible for pricing in the management team? Have you increased prices in the past? What happened? Have you lost pitches, or customers, based on being too expensive? Do your standard contacts include routine (e.g., annual) price increases? Which parts of your product/service are most valued by customers? Run some simple analysis: How variable is customer profitability? If there is a lot of variability this could point to sub-optimal pricing What happened to customer retention after the most recent price change? What % of sales involve the highest discount % that salespeople are allowed to offer? How does your pricing and packaging benchmark vs competitors? This isn’t to say that you should copy your competitors, but it is helpful to understand the context in which a potential customer will be evaluating your pricing. For software businesses, review the product roadmap for features that are tied to specific price increases vs being included ‘for free’. These ideas are of course not exhaustive, but hopefully give you enough to at least start a conversation about pricing. If we keep focused on how a better understanding of customer value can yield both profitable growth and improved satisfaction, I believe that we will see more effective deployments of pricing as a value creation lever. If you’d like to discuss how to start identifying pricing opportunities for your business, please Contact Me. All views expressed in this post are the author's own and should not be relied upon for any reason. Clearly.

Compared to its importance in post-deal value creation and frequency of discussion around the board table, Customer Acquisition rarely receives much explicit due diligence (DD) pre-deal. As a topic, it will, of course, be discussed frequently by Management and potential investors. But the emphasis will typically be to appraise Management’s key assumptions and decide on inputs for the investment case model, rather than a deeper analysis of opportunities and risks. Commercial DD, which I have both written and commissioned many times, answers important questions about the size of the market opportunity for a target business, its competitive positioning and historical evolution, and might look at some of the underlying business drivers e.g., sales per rep and number of reps. However, there are rarely more than a handful of pages in a Commercial DD report that are dedicated to how sophisticated a business is in terms of customer acquisition and the resultant opportunities/risks. This suggests that there is a case for more consistent use of Customer Acquisition DD. Weighted against this is the fact that the number of DD reports is ever increasing, and these are in general more about understanding risk to inform appetite/pricing for an investment than uncovering opportunities. What I learned from my time as a partner in a Private Equity Fund is to position work on Customer Acquisition as a ‘future planning’ exercise as opposed to pure (risk-focused) DD. This can deliver outputs that are more usable by both investor and Management and be seen as a constructive exercise rather than a one-way interrogation as many other DD workstreams can seem from Management’s perspective. There were times when I was working alongside a deal team when an understanding of the customer acquisition opportunity was transformative to their appetite for a deal e.g., uncovering incredibly attractive unit economics that a Management team didn’t understand, or because we identified the potential for faster growth based on understanding the online competitive landscape and search volume trends. Other times it wasn’t as influential as value creation was more likely to be driven by M&A, but Management still found the work helpful, and it helped to ‘convert’ them to wanting to partner with us. What does Customer Acquisition Due Diligence include? The scope of Customer Acquisition Due Diligence is likely to vary based on the sector, business model, and current go-to-market approach of a target business, but will typically include: An assessment of the go-to-market strategy – is there a clear strategy, is there Management alignment behind it, and how well this is put into practice? Specific topics can include: Target customers / Ideal client profile Proposition – what problem are we solving for our customers Marketing channels used to generate demand. Approach to pricing and packaging Sales model e.g., online conversion, inside sales, enterprise sales etc. An assessment of the operational platform across marketing & sales – Roles, responsibilities, and org structure, Data – in particular the measurement of marketing effectiveness and attribution Use of tech tools to run the business and serve customers. Processes / ways of working, including the use of automation. Effective use of third parties An understanding of where Management sees the opportunities and risks related to Customer Acquisition A robust view on the starting unit economics, specifically the LTV:CPA ratio – can we afford to spend more per acquired customer, do we have a leaky bucket problem (i.e., high churn)? This is rarely something that will exist even if a superficial analysis has been undertaken as part of the investment process. ‘Flow’ market data vs ‘stock’ – it is important to understand the target’s share of clients who are looking to purchase e.g., in any given year, not just their overall share of the market as would be included in the Commercial DD. One approach to this for businesses selling online is to complete a search headroom analysis, perhaps supplemented with primary research. Competitor approach to customer acquisition – sophisticated competitors will translate to a higher cost of accelerating customer acquisition. Overall, we are looking at how well the target business has created / understands its own growth flywheel and what the potential is to get this moving faster. In a mid-sized, growing business there will be many areas that could be developed further, but do the Management team focus on the areas that will move the needle fastest? Are they willing to try new things but rigorous in understanding what is working/not working? How can you make Customer Acquisition Due Diligence worthwhile? This sort of work should always come out with a small number of high impact recommendations – sometimes on the strategy, sometimes on the platform, sometimes on the people. I’d suggest forcing that list to be small to surface those opportunities that could play the most significant role in value creation. These outputs should be fully quantified to make them suitable to include in an investment case model – including relevant metrics such as the number of new customers, revenue, margins, acquisition costs, team costs etc. Concluding that there aren’t any straightforward ways to accelerate customer acquisition is also a very valuable finding. I learned early in my time as an investor that sometimes there could be theoretical scope for improvement but that was unlikely to create much value – either because it was too stretching for the Management team, or because other value creation levers such as M&A were simply a better fit (several months trying to drive online lead gen in a very traditional telecoms business was a real learning curve). A lot of the value from Customer Acquisition DD comes from pattern recognition. Where assessing the current approach of a target business, I rely on a picture built over time of what the best performing, comparable businesses had achieved so can make a relative judgement. I always seek to leverage the knowledge of others who have direct operating experience in a particular market e.g., to sense-check specific metrics or business practices, from the investor’s existing portfolio, my network or using an expert network. As well as supporting the ‘conversion’ of the Management team, I also found that by approaching the work as a ‘future focused’ exercise, it is sometimes possible to access data that other potential acquirers may not have asked for. I try to offer to share findings with a target Management team whether the deal happens or not as a quid pro quo. Even a modest information advantage in a competitive auction process is worth having! Perhaps unsurprisingly, I think there is enough evidence that Customer Acquisition Due Diligence can play a valuable role in the investment process, whether led by an in-house value creation team or by a third party – but its value is multiplied if it is positioned as growth/future focused. I probably wouldn’t even call it Due Diligence! A good piece of work up-front can be a great foundation to kick-start value creation post-deal. If you’d like to discuss how you can approach Customer Acquisition Due Diligence, please Contact Me. All views expressed in this post are the author's own and should not be relied upon for any reason. Clearly.